close icon

GBPAUD About to Change Direction

The GBPAUD exchange rate climbed to levels not seen since September, 2016. The pair is currently trading close to 1.7600, nearly 19 figures above the bottom at 1.5757 registered in October last year. Rising prices could be tempting, but also dangerous. In fact, the daily chart below suggests the British Pound is at a critical juncture against the Australian dollar.
gbpaud elliott wave analysis
In order to arrive at a meaningful conclusion, we have to put the current recovery in the context of the big picture. The daily chart allows us to see the wave structure of the decline from the August, 2015 top of 2.2389. It could easily be recognized as a five-wave impulse, labeled (I)-(II)-(III)-(IV)-(V). The sub-waves of wave (III) are also clearly visible.

According to the Elliott Wave Principle, every impulse is followed by a correction of three waves in the opposite direction. That is what we believe the recovery from 1.5757 represents – an (A)-(B)-(C) simple zig-zag retracement. The theory says that once the corrective phase of the cycle is over, the trend resumes in the direction of the impulsive sequence. This means that if this count is correct, a bearish reversal should be expected in GBPAUD. In addition, wave (C) has reached the resistance area of wave (IV). Now let’s take a look at the structure of wave (C) from up close.
gbpaud elliott wave chart analysis
Wave (C) looks like a complete impulse pattern with an extended third wave. In our opinion, this is the worst possible time to join the bulls. Even without the big picture in mind, the 4-hour chart would be enough to prepare us for a change in direction. Besides, the relative strength index shows a bearish divergence between waves 3 and 5 of (C), which gives us another reason not to be bullish on GBPAUD.

It has been a good run, but the bulls seem exhausted now. The analysis suggests it is time for the bears to take the wheel and drag the pair lower. In the long-term, GBPAUD is supposed to decline to a new low, beneath 1.5750. Nevertheless, picking tops is very risky. Staying aside and waiting for the reversal to actually occur sounds like the better idea.



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Ahead of EURUSD ‘s Disappointing Start to 2021

Overall, 2020 was a good year for EURUSD bulls. Despite the March crash during the coronavirus-related volatility, the pair ended the year up almost 9%. With more stimulus already in the pipeline at the start of 2021, it made sense to expect further devaluation of the dollar against the Euro. Alas, common sense doesn’t always…

Read More »

USDJPY Gains 450 Pips and Counting in Two Months

2020 wasn’t a good year for USDJPY bulls. Starting from 108.63 in January, the pair closed at 103.32 on December 31st, down 4.9% in twelve months. But what the dollar lost against the yen in the entire 2020 it is now close to recouping in less than three months. USDJPY is approaching 108.50 as of…

Read More »

USDTRY Drop Accelerates as Elliott Wave Predicted

The Turkish Lira hit its highest level against the U.S. dollar in six months. The country economic and legal reforms announced last year coupled with tighter monetary policy appear to be giving the desired effect. USDTRY is down 19.3% from its November 2020 high after being in an uptrend since mid-2008. Most analyst, however, are…

Read More »

EURUSD Surges 570 Pips After Fibonacci Encounter

EURUSD is trading at levels last seen in April 2018, when it was on its way down to 1.0636 by March 2020. The pair is now approaching 1.2200, up 14.5% since the COVID-19 selloff nine months ago. But trends don’t move in a straight line. Two months ago, we showed you how Elliott Wave analysis…

Read More »

USDTRY Heads South After Central Bank Decision

Turkey finally took a decisive step towards taming the double-digit inflation, which has been destroying the Lira’s value for years. The country’s central bank lifted the benchmark interest rate to 15%, up 475 basis points from its previous standing. USDTRY fell as low as 7.5031 earlier today, on track for a second consecutive week of…

Read More »

GBPNZD Can Slide to Sub-1.9000 In Coming Weeks

What will EURUSD, USDJPY and USDCAD bring next week? That is the subject of discussion in our next premium analyses due out on Sunday! GBPNZD exceeded 2.0270 in mid-August, but the bulls could not keep the positive momentum. A month later, the pair fell to 1.9055, losing 6% in the process. And just when it…

Read More »

Ahead of EURUSD ‘s 280-pip Drop in September

EURUSD had been on a tear since mid-March when it bottomed out at 1.0636. Nearly six months later, on the first day of September, the pair exceeded the 1.2000 mark. The bulls seemed firmly in control and the Fed’s money printing suggested further losses ahead for the dollar. However, years of experience had taught us…

Read More »

More analyses